CAIRO, Nov 26 (Reuters) - Egyptian police fired a water cannon to disperse dozens of protesters near the Ministry of Interior on Tuesday after they defied a new law that restricts demonstrations.

The protesters had gathered in front of the Press Syndicate to commemorate the death of a liberal activist killed in clashes with police two years ago, challenging the new legislation passed on Sunday that bans protests without police approval.

Human rights groups have condemned the law as a major blow to freedom in Egypt, the most populous Arab state and a U.S. ally which has experienced considerable political upheaval since the overthrow of autocrat ruler Hosni Mubarak in 2011.

Under the law, protests at places of worship are banned and the Interior Ministry has the right to forbid any public meeting of more than 10 people.

"(The) new protest law gives security forces free rein," Amnesty International said in a report issued this week.

A security official said Tuesday's crowd near the Interior Ministry had not obtained permission to protest and had ignored warnings to leave the area.

The army-backed government has said it is not against peaceful protests but wants to restore order in the streets. It has also complained that protests often disrupt traffic.

"We are implementing the new protest law that requires protesters to seek permission from the interior ministry three days before the protest." a police official at the scene said.

Egypt has stumbled in its path to democracy since the fall of Mubarak, with the army ousting the country's first freely-elected president, Mohamed Mursi of the Muslim Brotherhood, on July 3, after mass protests demanding early elections.

Hundreds of Islamists have been killed and the Brotherhood's leadership has been arrested in an ensuing security crackdown.

Mursi's supporters held protests in different cities in Egypt on Tuesday. In Cairo, female students at Al-Azhar University for Islamic learning, which tows the government line, stormed into a dean's office and destroyed her desk. (Reporting by Asma Alsharif, writing by Yasmine Saleh; Editing by Michael Georgy and Gareth Jones)